Turnover and technology matter because a small farm is not simply a smaller version of a large farm, writes Wandile Sihlobo
17 October 2018 – 16:53 Wandile Sihlobo
The growing need to boost rural economic activity through agricultural development has re-introduced the discussion on the sub-division of land to create as many small farms as possible to benefit rural communities.
Some agricultural economists (myself included) have been sceptical of this idea due to doubts over the viability of small farms when viewed from a land size perspective only.
In 1970, a law was put in place to prevent the sub-division of farms along family lines without the consent of the minister. At the time, family farms were being sub-divided so that all of the farmers’ children could inherent a portion of the family farm. However, the government of the time was concerned that this would create a network of farms that were not economically viable.
Viability was adjudged to be an income potential equivalent to that of an average civil servant. Farms that were too small to produce this income were deemed economically unviable.
In recent weeks, this has brought to the public discourse a debate that, for a long time, has largely been confined to academic corridors: what should be regarded as a “viable” income from a farming business, and what is a small-scale farmer?
In this respect, an article by agricultural economists and professors Johann Kirsten and Johan van Zyl, published in Agrekon Journal in 1998, is illuminating. I will draw from it to address this issue.
Size is not a great criterion
To lay a foundation from a South African perspective, the fact that we do not have a strong, small-farming sector contributes to the scepticism and confusion about small-scale farming. Hence, some people (even its proponents at times) equate small farmers with the farmers in the former homelands, farming on 1ha of dry land or less. This is not a small farm, but size is, in any event, not a good criterion for defining small farms. For example, 1ha of irrigated peri-urban land, suitable for vegetable farming or herb gardening, has a higher profit potential than 500ha of low-quality land in the Karoo.
Turnover, or rather the level of net farm income, determines the farm size category, not the land size. This is why the AgriBEE Sector code defines exempted micro-, qualifying small and large enterprises according to their turnover, and not according to the physical size of the farm.
Also worth noting is that roughly 45% of all commercial farms in SA are defined as small-scale family farms, with a gross farm income of less than R500,000; hardly a full-time livelihood. This is according to data from Statistics SA. Therefore, a small farm is a relative concept — relative to the particular ecological region and soil quality and also relative to the particular farming industry.
It should also be emphasised that small-scale farms are not simply scaled-down models of large farms, since technology and cultural issues and the livelihood mix might differ. These are some of the issues the proponents of small-scale farming need to consider in their arguments in favour of sub-dividing farms into small units while remaining silent on the ecological and agrarian realities of this country.
I should also highlight that citing Asian countries as an example of successful small “size/scale” farms that SA should emulate is a bit disingenuous given the superior climatic conditions and soil quality of those countries. SA is a semi-arid country, folks!
- Sihlobo is head of agribusiness research at the Agricultural Business Chamber of SA.